Understanding The Dat Financial Statements

790 WordsSep 9, 20154 Pages
Understanding the Data: Financial Statements In order to effect the proper changes in an organization it is necessary to institute a way to assess their level of progress. To do this a variety of tools have been designed to assist businesses in their financial processes. These include income statements, balance sheets, and cash flow statements. Each item individually provides a different aspect of the organization’s performance level for a particular time period. However, by utilizing these statements together, it provides the management and owners, the necessary information to obtain the total scope of the financial status of the organization. An income statement is designed to provide the data stating the “revenues generated and expenses incurred by a company over an accounting period” (Melicher, 2014). In providing this data to the managers and owners of the firm to assist in identifying the success of the company during the accounting period. The income statement identifies the gross profit, the operating income, the income before taxes, and the net income of the organization. This information allows analysts to determine the growth of the company during the designated accounting period. A balance sheet portrays a company’s financial position at a given point in time. It identifies the company’s assets, liabilities, and the company’s equity. The balance sheet is derived “from the fact that the two sides of the equation (Assets = Liabilities +
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